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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12227
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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I am in Los Angeles California. I am self-employed. What

Resolved Question:

I am in Los Angeles California.

I am self-employed.

What are the requirements to qualify all my meals as business expenses?
What are the requirements to qualify all my trips as business expenses?
Submitted: 8 months ago.
Category: Tax
Expert:  Megan C replied 8 months ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

Unfortunately, you would not be able to classify ALL your meals as business expenses. Even if a meal has a business purpose, only 50% of it is deductible.

Megan C :

To qualify to be a business expense, you would have to have a business purpose for the meal. Grabbing lunch between clients would NOT qualify for a business expense, nor would simply taking a lunch break and eating lunch.

Customer:

I am good Megan... Thank you... How are you?

Megan C :

Good. Have you been able to see what I have said so far about your meals?

Customer:

Yes... I have seen what you said so far about meals. thank you.

Megan C :

To qualify for a business expense, there would have to be a business purpose. For example, taking a client out to lunch. However, only half of it would be deductible.

Customer:

What about trips?

Megan C :

For a trip to be a business trip, the primary purpose of the trip must be something to do with your business

Megan C :

for example, visiting a client or completing a job out of town

Customer:

I am in Real Estate Sales and Real Estate Investments.

Megan C :

Ok

Customer:

How do we verify that a primary reason for a meal or a trip is business?

Megan C :

If you are transacting business or looking for business opportunities, then it has a business purpose

Megan C :

But, you couldn't like fly to Hawaii and look at a couple houses knowing you would never invest, and then deduct the trip because you looked at properties

Megan C :

It truly has to be for a business reason.

Megan C :

Do you have further questions about this?

Customer:

Can it be a partial business trip/

Megan C :

Yes, it can be a partial business trip

Customer:

Where half of the time of the trip will be used to for business and half for pleasure?

Megan C :

For example, you fly to Nevada to look at some properties to invest in. You stay a week, but only look at the properties for 2 days. Your travel to and from Nevada plus the room for the nights you were working would be deductible. The rest of the trip would not be

Customer:

So is it fair to say that if I spend $4000 on a trip where half of the time was spend in pleasure and the other half business I would deduct $1000 worth of business expenses which is 50% of the half expenses spent there?

Megan C :

Yes, that would be fair to say

Customer:

For clean record-keeping and to be audit-proof ready, what measures or documentation do I need to record or keep?

Megan C :

You need to keep receipts, and a detailed log of what you do. Get one of those yearly date planners

Megan C :

and jot down in the days what you did.

Customer:

Great!

Customer:

I am setting up a corporation in Los

Customer:

Angeles county, California

Megan C :

okay

Customer:

I am preparing this so I can get my real estate business to pay me under a corporation and they I can strategically decide what we pays ourselves as employees or consultants of the corporation. Is this is a good strategy for saving on taxes?

Megan C :

sounds good to me. A business expense is an expense - doesn't matter how you're set up you will still save on taxes

Megan C :

Is there anything else that I can assist you with today?

Megan C :

If not, please rate as 'excellent' so that I may receive credit for assisting you today

Customer:

Yes... I need a little more help and I will rate you excellence when done.

Megan C :

What else can I assist you with related to your business travel and meals?

Customer:

That is all for now.

Customer:

Thank you for your great help and have a wonderful day!

Megan C :

Okay thanks. Please let me know if you have further questions

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12227
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 2 other Tax Specialists are ready to help you
Expert:  Megan C replied 8 months ago.
Thanks, XXXXX XXXXX your positive rating. Please come back and visit me any time you have a tax question that needs answered. It was a pleasure working with you today!
Customer: replied 8 months ago.

Megan,


I have 3 kids ages 16, 18, 22.


They work with me in my business.


I need to issue them 1099 for this year.


Legally in Los Angeles County, California, What are the amounts of earnings they can make before they need to legally declare the income?


 


 

Expert:  Megan C replied 8 months ago.
Thank you for your follow up.

The correct way to handle your children's pay is to issue W-2 forms to them. The 16 year old would not be subject to Medicare/Social security taxes. The 16 and 18 year old would not be subject to FUTA.

If they are working for you in your business, then they would not be independent contractors -which is what a 1099 would be used to pay. You will have to issue W-2 forms and pay the appropriate taxes.

If these children are your dependents, they would need to file a tax return if they earn over $5,950 from you. If they were paid on a 1099 (which would be incorrect) they would need to file if their income was over $400 after expenses.

Thanks, XXXXX XXXXX me know if you need anything additional.
Customer: replied 8 months ago.

So it is fair to say that if they did not make over $5950, None of my 3 kids have to report that income, but I can report those incomes as expenses to my business, right?


 

Expert:  Megan C replied 8 months ago.
They would still report this as income, but none of it would be taxed, because it's the standard deduction. Don't forget you would have Medicare and Social Security tax for the 18 and 22 year old, and FUTA for the 22 year old.

All this would be an expense of your business, yes.

Thanks!

Please take a moment to rate my response as "Excellent" so that I may receive credit for further assisting you today.
Customer: replied 8 months ago.

Would that income affect them for college financial aid application?


 

Expert:  Megan C replied 8 months ago.
They would have to declare it as their income, yes. So it could impact their financial aid. I'm not sure though by how much.

Thanks, XXXXX XXXXX don't forget to rate again so that I may receive credit for assisting you today.
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12227
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 2 other Tax Specialists are ready to help you

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